FERC Approves Regional Equipment Sharing Program

On April 3, 2018, FERC pre-approved numerous utilities’ request to enter into certain future transmission system related transactions in the event of a catastrophic grid reliability event (“Triggering Event”). As a result, participant-utilities in the Regional Equipment Sharing for Transmission Outage Restoration Agreement (“RESTORE Agreement”) are eligible to purchase certain replacement transmission system equipment (the “Proposed Transactions”) from other participant-utilities if there is a Triggering Event that impacts transmission service capabilities. In addition, FERC also granted the utility-applicants’ (“Applicants’”) request for waiver of certain affiliate purchase restrictions in the event that qualifying transactions between affiliates becomes necessary.

As explained by the Applicants, the RESTORE Agreement, currently signed by a total of 28 participating utilities, is designed to allow efficient and timely bilateral transfers of electric transformers and other critical transmission-related equipment (“Qualifying Equipment”) during a Triggering Event. Through the RESTORE Agreement, each participant must purchase, store, and maintain its own Qualifying Equipment, as well as make it available for purchase by another participant impacted by a Triggering Event. The Applicants argued that the Proposed Transactions are similar to the spare transformer transactions that FERC pre-approved in a prior order issued in 2006, and that the RESTORE Agreement aligns with the broader goal of enhancing resiliency and grid reliability.

Because the transactions at the heart of the RESTORE Agreement involve the disposition and acquisition of transmission facilities ordinarily under FERC’s jurisdiction, the Applicants submitted an application under section 203 of the Federal Power Act (“FPA”) for prior approval. In the process, the Applicants committed to making two informational filings in the event of a transaction under the RESTORE Agreement, one filing within 30 days of the transaction, and a second filing within six months after the close of the transaction. The Applicants also requested waiver from FERC’s regulatory limits on transactions between affiliates, arguing that, although no RESTORE Agreement participants are affiliates with one another, such a waiver would provide certainty as other members join in the future.

FERC approved the Proposed Transactions in the RESTORE Agreement. At the outset, FERC acknowledged its lack of jurisdiction over equipment that is not in service at the time of transfer, but nonetheless found section 203 authorization to be required in this case because at least some of the equipment to be transferred could be in service at the time of a Proposed Transaction, and thus, at least this subset of the equipment is subject to FERC’s jurisdiction under FPA section 203. In approving the Proposed Transactions, FERC also granted the Applicants’ request for a waiver from the affiliate pricing restrictions that might otherwise be applicable if an affiliate of an RESTORE Agreement participant also became a signatory. FERC concluded that such a waiver would eliminate doubt and confusion for prospective participants, and ensure that Qualifying Equipment will remain available to any participant following a Triggering Event.

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